Changes in New Zealand Tax 2011


Published on

Quick account of the major changes in the New Zealand tax system over 2012.

Published in: Technology, Business
  • Be the first to comment

  • Be the first to like this

No Downloads
Total views
On SlideShare
From Embeds
Number of Embeds
Embeds 0
No embeds

No notes for slide

Changes in New Zealand Tax 2011

  1. 1. TAX AND CORPORATE NEWS Latest news and information about tax and corporate legislations in New Zealand Tax Changes in New Zealand 2011 In 2011 the New Zealand government implemented several changes to the national tax legislation, easing the cost of compliance for New Zealand companies and modernizing several aspects of the country’s tax rules. The series of changes brought in throughout the year were specifically aimed at improving New Zealand economic performance while raising greater tax revenues and boosting business performance around the country. Investment Protocol with Australia On February 16th the Prime Minister of Australia Julia Gillard and the Prime Minister of New Zealand John Key signed a new Investment Protocol (IP) under the two countries’ Closer Economic Relationship (CER) trade agreement.KIRILL KRUGER Following the passing of the IP the screening thresholds for Australians investing in New Zealand were raised from AUD 231 million to AUD 1.005 billion. New Zealanders making an investment into Australia saw a newDevelopment Manager at threshold of NZD 477 million, compared to the previous threshold of NZD 100 million.Abaconda ManagementGroup , Director of AMG Corporate Rate CutBusiness Development. The corporate income tax applied to the profits of a businesses in New Zealand is reduced to 28 percent from 30 percent. The lowered rate also applies to unit trusts, life insurance policyholders, and other savings vehicles.Kirill Kruger is a young but Working for Families Eligibilityexperienced financial Eligibility for Working for Families tax credits and Community Services cards is tightened, as the definition ofconsultant, with a “income” in means tests is shifted to include sources such as family trusts and to exclude rental andspecialization in investment and NewZealand taxation research, LAQC and LTCsmanagement and planning. The government abolishes Loss Attributing Qualifying Companies (LAQC), and replaces them with Look-Being a successful Through Companies (LTC). The new Look-Through Companies are “tax transparent entities” which allows theentrepreneur he has also profits and expenses of the company to be “passed through” to the shareholders.authored advanced studiesin the field of financial The new entity offer 0% tax benefits to foreign entrepreneurs who raise their profits outside of New Zealand.academics, and regularlywrites reports on current Depreciationaffairs and developments ininternational and New Businesses and landlords are not longer able to claim depreciation on buildings with life spans exceeding 50Zealand finance, taxation years.and management. Portfolio Investment Entities A Bill is released, containing new rules for the tax treatment of non-resident investors in Portfolio Entities. The new legislation is aimed at boosting the country’s appeal as a destination for investment funds, by granting 0% tax benefits to non-resident investors in a PIE which only has foreign sourced incomes.+64 7 8080 444© Abaconda Management Group
  2. 2. Excise Tax ThresholdThe thresholds on the national excise tax system are adjusted for the first time in 14 years, greatly easingcompliance costs for small wineries around the country. Prior to the new rules, wineries with excise taxliabilities in excess of NZD 10 000 were required to pay their tax obligations on a monthly basis. Following thechanges, only wineries with tax liabilities exceeding NZD 100 000 are required to pay every month. Smallwineries with obligations below NZD 50 000 only have to pay their tax liabilities once a year. Producers with taxliabilities between NZD 100 000 and NZD 50 000 will pay excise tax once every six months.Deductions on Software DevelopmentThe Revenue Minster of New Zealand Peter Dunne confirms that the Inland Revenue Department will treatfailed software development projects as deductible. Prior to the new rules, expenditures on softwaredevelopment projects which failed were not deemed to be deductible. The change was aimed at removingany barriers to businesses choosing to pursue new and innovative development projects.Tax Compliance ImprovementsFollowing a series of public consultations a new Bill is passed, containing measures aimed at improving taxcompliance procedures and making it easier for New Zealand taxpayers to meet their obligations. As per thesuggestions given in the consultations, the IRD will implement greater use of online and electronic filing, andreduce the number of paper forms that must be submitted. The new electronic filing systems andinfrastructures allow the government to implement greater information sharing between differentdepartments and agencies.GST FraudThe government clarifies Goods and Service Tax regulations, to eliminate the occurrence of “phoenix fraudschemes”. The fraudulent practice involved two cooperating parties, which would claim that one party made alarge purchase from the other, and would receive a corresponding GST refund from the IRD. However, the oneof the parties would then wind down their company in order to avoid the GST obligation. New regulations wereintroduced which made it impossible to exploit this loophole.Gift Duties AbolishedGift Duty is abolished for the disposition of any property in New Zealand after October 1 st 2011. The levy wasremoved as it was deemed to be inapplicable to the modern taxation and business environment, and set backNew Zealand taxpayers more in compliance costs than it raised as tax revenues.Use of Money Interest DeductibilityThe Inland Revenue Department clarified the rules regarding Use-of-money interest, saying that UOMI is nowan expense and is deductible. Prior to the clarification, UOMI was only counted as an expense under a verylimited set of conditions. UOMI can be claimed as an expense in the year it was paid. 2